ASSR 2020 Quarterly Technical Update-Q1

4/17/2020

1

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

Q1 2020

APRIL 8, 9 & 10, 2020

2

Agenda

Accounting Update SEC Matters Update PCAOB Update Corporate Governance Update

4/17/2020

2

3

ADAM BROWNNational Assurance Managing

Partner - Accounting

(214) [email protected]

PAULA HAMRICNational SEC Practice

Partner


AMY ROJIKNational Assurance Partner


With you today

4

AccountingUpdate

4/17/2020

3

5

FASB Update

6

Q1 2020 Accounting Standards Updates

ASU* TITLE BDO ALERT

2020-01

Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323 and Topic 815

ASU 2020-01 Alert

2020-03 Codification Improvements to Financial Instruments Alert Coming Soon

2020-04Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

Alert Coming Soon

*ASU 2020-02 was also released during the quarter to amend certain SEC paragraphs related to the effective dates of the new Credit Losses and Leases standards

4/17/2020

4

7

Effective Dates Public Business Entities Other Entities

FYs beginning after 12/15/2020 FYs beginning after 12/15/2021

ASU 2020-01, Clarifying the Interaction between Topics 321, 323 and 825

Clarifies the following issues: Measurement alternative for investments in equity instruments that do not

have readily determinable fair value• Observable orderly transactions that result in the investor applying (or discontinuing) the equity

method of accounting under Topic 323 are considered for purposes of the measurement alternative in Topic 321

Certain Forward contracts and purchased options on securities that would be accounted for under the equity method in Topic 323• For purposes of the scope of Subtopic 815-10, Certain Contracts on Debt and Equity Securities,

entities should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in Topic 825

8

Effective Dates The amendments have various effective dates and transition requirements, some depending on whether an entity has previously adopted ASU 2016-13

Clarifies the following issues:

ASU 2020-03, Codification Improvements to Financial Instruments

Contractual term for measuring expected credit losses

When measuring expected credit losses on a net investment in a lease, the lease term determined in accordance with ASC 842 should be used as the contractual term

Interaction between ASC 326 and ASC 860-20

An allowance for credit losses should be recorded when an entity regains control of financial assets sold.

Fair value option disclosures in ASC 825-10

Disclosure requirements apply to all entities

Disclosure for depository and lending institutions

The disclosure requirements regarding debt securities in ASC 320 apply to depository and lending institutions in the scope of ASC 942

4/17/2020

5

9

Background

Potential effect on the ability to retain hedge accounting. Potential challenges in applying GAAP related to modifications of financial

instruments. FASB provided optional practical expedients and exceptions for a limited period

of time to ease the burden in accounting for the reference rate reform. The guidance applies only to transactions that reference LIBOR or another

reference rate expected to be discontinued because of reference rate reform.

ASU 2020-04, Reference Rate Reform

Effective Dates The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The amendments have various transition requirements.

10

Optional expedients for contract modifications

Elected expedients for contract modifications must be applied consistently to all eligible contracts or transactions.

ASU 2020-04, Reference Rate Reform (Cont.)

Contracts in the scope of Topic 310, Receivables and Topic 470, Debt

Accounting for the modification by prospectively adjusting the effective interest rate.

Lease modifications in the scope of Topics 840, 842

Accounting as a continuation of the existing contract – no reassessment of lease classification and discount rate, and no remeasurement of the lease payments.

Contracts in the scope of other topics or industry subtopics

Entities are permitted to consider modifications as an event that does not require contract remeasurement or reassessment of previous accounting determination.

Embedded derivatives Entities are not required to reassess whether embedded derivatives are considered clearly and closely related to the host contract.

4/17/2020

6

11

Hedge accounting

Except for the expedient to change the designated benchmark interest rate in a fair value hedge, all optional expedients for hedge accounting may be elected on an individual hedging relationship basis.


Critical terms

Qualifying changes in the critical terms of an existing hedging relationship due to the reform will not result in dedesignation of the hedging relationship

Excluded components

Entities may change the systematic and rational method used to recognize in earnings the components excluded from hedge effectiveness assessment

Shortcut method

Entities may continue to apply this method for the remainder of the hedging relationship for fair value and cash flow hedges

Fair value hedges

Entities may change the designated benchmark interest rate documented at hedge inception to a different eligible benchmark interest rate, which will be applied consistently across similar fair value hedging relationships

Cash flow hedges

Entities may continue hedge accounting following a change in the hedged interest rate risk if the hedge is highly effective

Entities may disregard potential changes in the designated hedged interest rate risk when it assesses whether the hedged forecasted transaction is probable

Entities may change the designated method used to assess hedge effectiveness in order to disregard certain mismatches between the designated hedging instrument and the hedged item

12

HTM securities Entities are permitted to make a one-time election to sell or transfer (or both)

debt securities classified as held to maturity to available for sale or trading. Debt securities are eligible for this election if they:

• Were classified as held to maturity before January 1, 2020, and• Reference a rate that is expected to be discontinued because of the

reference rate reform Entities are not required to transfer all of the remaining debt securities

classified as held to maturity.


4/17/2020

7

13

Accounting and Reporting: Q1

Q1 2020 Matters Complexities in forecast revisions

Need for valuation expertise

Negotiations with lenders

Measurement issues:

• Revenue: variable consideration estimates

• Leases: modifications and “Right of Use” asset impairments

• Debt modifications & TDRs

• Inventory, A/R, PP&E, goodwill & intangibles

Income taxes – state/local, federal, foreign & valuation allowances

Document of judgments & estimates

Not a complete list…

CARES Act: Corporations (General) Business tax relief and rule modifications

– e.g., NOLs, interest expense deductions, AMT credit acceleration, etc.

Reminder that tax law changes need to be recorded in period of enactment (Q1)

CECL deferral (financial institutions only) Reconciling GAAP: FASB/SEC may need to

issue additional guidance/relief? Bonus depreciation and accelerated

depreciation on qualified improvement property

Not a complete list…

BDO Guidance: Financial Reporting Considerations for Q1

14

FASB Meeting to Address Standard-Setting Issues During the COVID-19 Pandemic –April 8, 2020

Agenda includes:• One year optional deferral

• ASC 606 – private franchisors• ASC 842 – private entities and certain non-profits

• Lease modifications• Requests for deferral of significant standards that are not yet effective• Impact of COVID-19 on future standard-setting

• See FASB meeting recording

Accounting and Reporting: Looking Forward

4/17/2020

8

15

SEC Matters

Update

16

SEC Update – Discussion Outline

Topics Staff Changes

COVID-19 Reporting Relief and Guidance

Commission Activities

• Final Rulemaking

• Rulemaking Proposals

• Interpretive Guidance

4/17/2020

9

17


Exemptive order extends filing due dates by 45 days for Forms 10-K and 10-Qs due between March 1 and July 1, 2020

• Form 8-K must be filed by original due date to take advantage of the relief

• 12b-25 grace period still available if a registrant is unable to file by extended due date

o 15 calendar days for Form 10-K

o 5 calendar days for Form 10-Q

• Also refer to Compliance and Disclosure Interpretations 135.12 135.13 and 104.18

Staff guidance for annual shareholder meetings

• Changes to the annual meetings

• Conduct of virtual shareholder meetings and proper shareholder notification

• Presentation of shareholder proposals and the conditions for excluding a proposal from the annual meeting

18


Corp Fin Disclosure Guidance Topic No. 9

• Provides views on disclosures and securities law obligations registrants should consider related to COVID-19

• Disclose:

o The impact COVID-19 has had on the registrant’s business

o Management’s expectations and response to the future impact of COVID-19 on the business

o Management’s plans for addressing related uncertainties

• Disclosures should be specific and will likely affect:

o Business

o Risk factors

o Management’s discussion and analysis

o Disclosure controls and procedures and internal controls over financial reporting

o Financial statements

4/17/2020

10

19

SEC Corporation Finance Disclosure Guidance (Topic No. 9)

Financial condition and results of operation impacts

Impact on capital and financial resource and liquidity needs and sources

Expected impact on assets on the balance sheet, including fair-value assts

Anticipated material impairments (e.g., with respect to goodwill, intangible assets, long-lived assets, right of use assets, investment securities), allowance for credit losses, restructuring charges etc.

Remote work arrangement impacts on operations, systems and controls

Business continuity plans and associated costs

Impact on demand for products and services

Impact on supply chain or methods to distribute products or services

Impact of constraints or other impacts on your human capital resources and productivity

Impact of travel restrictions and border closures ability to operate and achieve business goals

Questions for CFOs/Audit Committees in considering present and future impacts of COVID-19 specific to their company including, but not limited to:

Refer to SEC Order: https://www.sec.gov/corpfin/coronavirus-covid-19

20

Commission Activities – Final Rulemaking

Amendments to the Accelerated and Large Accelerated Filer definitions

o Smaller reporting companies with less than $100 million in annual revenue are excluded from accelerated filer definition

20

4/17/2020

11

21


Accelerated Filer amendments (continued)

• Business Development Companies with investment income less than $100 million and public float less than $700 million also excluded from accelerated filer definition

• Public float thresholds for exiting status are higher

o Exiting Accelerated Filer status under public float test increased from $50 million to $60 million

o Exiting Large Accelerated Filer status increased from $500 million to $560 million

• Effective for annual reports due on or after April 27, 2020 (even if fiscal year end precedes April 27)

• Management’s responsibility to establish, maintain, assess and report on internal controls over financial reporting remains unchanged

22


How an issuer evaluates filer status and requirements as a result of amendments

4/17/2020

12

23


S-X Rule 3-10 Amendments – simplify and streamline the financial disclosures for registered debt offerings and periodic reports thereafter

• Partly relocate requirements of Rule 3-10 to Rule 13-01• Continue to permit issuers to omit financial statements of subsidiary

issuers and guarantors when certain conditions are met • Require summarized financial information for issuers and guarantors for

latest fiscal year and subsequent interim period• Require expanded qualitative disclosures about nature of the guarantees

and the issuers and guarantors • Permit the amended disclosures outside of the parent company’s

financial statements in MD&A • Permit omission of financial and non-financial disclosures once issuers and

guarantors no longer have Exchange Act reporting obligations

24


S-X Rule 3-16 Amendments

• Rule 3-16 is replaced by new Rule 13-02

• Permits reduced financial and non-financial disclosures for each affiliate whose securities are pledged as collateral

Effective date of Rule 3-10 and 3-16 amendments is January 4, 2021

• Early application permitted!

4/17/2020

13

25

Commission Activities – Rulemaking Proposals

Proposed amendments to Regulation S-K would:

• Generally promote a principles-based approach to disclosure

• Streamline disclosure instructions and clarify overall objective of MD&A

• Eliminate Selected Financial Data and Selected Quarterly Financial Data table requirements

• Eliminate disclosure of contractual obligations in tabular format

• Clarify guidance for disclosure of critical accounting estimates

• Clarify requirements regarding the results of operations discussion (and specifying reasons for underlying material changes)

Comments on the proposal due April 28, 2020

26

Commission Activities – Rulemaking Proposals

Proposed amendments to the exempt offering framework:

• Aims to simplify and improve elements of the exempt offering framework (e.g., Regulation A, Regulation D, and Regulation Crowdfunding)

• Increases certain offering limits and revises individual investment limits

• Sets clear and consistent rules for communications between issuers and investors

• Synchronizes certain disclosure and eligibility requirements to reduce differences between exemptions

Comments due June 1, 2020

4/17/2020

14

27

Commission Activities – Interpretive Guidance

Interpretive Guidance on Key Performance Indicators and Metrics in MD&A

• Includes considerations and disclosures that are expected to accompany non-financial and financial metrics

DISCLOSE

o Clear definition of metric and how it is calculated

o Statement indicating why the metric provides useful information

o Statement indicating how management uses the metric in managing or monitoring the performance of the business

CONSIDER

o What regulatory framework applies – e.g., GAAP, Regulation G, or Regulation S-K

o Whether estimates or assumptions underlying the metric should be disclosed

o Additional information to provide adequate context for an investor’s understanding of the metric presented

28

PCAOB Update

4/17/2020

15

29

Reminders for audits nearing completion that pertain to: Time constraints/challenges in obtaining/evaluating sufficient and

appropriate audit evidence impacting identification, assessment and response to RMMs

Effects on F/S that may impact the audit – including revisions to risk assessments, presentation and disclosures

Effect on financial reporting processes and controls Audit Committee communications of significant matters:

• Changes to planned audit strategy or risks• Changes to management’s processes used to develop critical

accounting estimates or significant assumptions impacting the quality of financial reporting

• Control-related matters – SD/MW• Difficult or contentious matters requiring consultation• Evaluation of going concern• Significant difficulties encountered during the audit

Auditor’s Report – CAM, emphasis of a matter(s), or explanatory language

Quality control considerations – changes to audit firm policies for consultations and engagement quality reviews

PCAOB COVID-19 Reminders Spotlight

https://pcaobus.org/Documents/COVID-

19-Spotlight.pdf

30

COVID-19: Audit Committee QuestionsAUDIT

What unintended consequences of COVID-19 may increase incentives or pressures on management that may result in management override of controls?

Are there changes in ICFR that need to be evaluated to ensure management certifications are adequate?

Are we able to ensure continued proper segregation of duties and monitoring controls given changing physical work situations?

Have any significant risks or material weaknesses been identified as a result of impacts from COVID-19?

What changes in risk assessments have auditors determined need to be made and how will that impact the audit strategy?

Are there known impediments – either by management or by the auditors - that may delay timely filing of financial statements? (e.g., lack of access or ability to obtain audit evidence or other information)

What additional efforts may be required by the auditor to ensure the performance of a high-quality audit?

4/17/2020

16

31

COVID-19: Audit Committee QuestionsAUDIT

What additional resources or expertise may be needed by management to properly account for judgments or estimates or changes related to circumstances brought on by COVID-19?

Does my audit firm have the depth of or access to adequate resources to address complex accounting and auditing questions, including industry-specific matters, as they arise?

Do my management teams, as well as my auditors, have the ability to properly supervise and direct the work of their staff and teams?

Are there additional challenges in performing auditing procedures due to multi-geographical considerations?

Has COVID-19 impacted circumstances that may call into question the company’s ability to continue as a going concern? What are management’s plans to address? How do these impact the auditor’s going concern evaluation?

Are there any auditor independence issues that have arisen with respect to COVID-19?

32

COVID-19: Audit Committee QuestionsACCOUNTING AND REPORTING

Has management adequately assessed changes in risk factors impacting our business? Are these appropriately reflected in our financial statements?

Has management properly identified significant accounting areas where impacts from COVID-19 are likely? Has management further accounted for related income tax effects of these impacts?

Have we properly accounted for and disclosed changes in significant estimates and judgements impacting the financial statements?

Has management, along with the auditors, identified applicable relief opportunities with respect to the 2020 CARES Act and appropriately factored these into the accounting and reporting, including income tax effects, within the financial statements?

Are there accounting or disclosure matters that have required significant consultations outside of the audit engagement team?

Have the auditors and management identified significant or industry-specific matters related to the interaction of the CARES Act and GAAP or GAAS impacting our financial statements that need regulatory consultation?

Has new information arisen regarding COVID-19 events contained in previously filed financial information that requires updating of current disclosures?

4/17/2020

17

33

COVID-19: Audit Committee QuestionsCORPORATE GOVERNANCE

As an audit committee, how are we maintaining our education with respect to COVID-19 considerations, relief efforts and related risks and opportunities?

Are we appropriately engaging with internal and external stakeholders and providing transparent and consistent communications about significant impacts on our business?

Are we allocating enough time and making ourselves available to discuss critical issues as they arise with management, the auditors and the board?

Are we keeping the full board appropriately updated as to significant challenges with respect to financial accounting and reporting?

Are we considering responses to anticipated questions from shareholders during upcoming annual meetings?

Is management actively and effectively engaging with lenders, customers and other stakeholders in a timely and productive manner and are the results of those engagements reflected in the financial accounting and reporting?

Are we, as a board committee, appropriately considering additional risks that have arisen related to other stated committee responsibilities as described in our Audit Committee Charter – e.g., COVID-19 cybersecurity and data privacy risks?

34

PCAOB Inspections Relief for Audit Firms

On March 23, 2020, the PCAOB announced it would provide PCAOB-registered audit firms an up to 45-day relief period from inspections, with the exception of providing us access to audit documentation for certain engagements.

Audit firms that wish to avail themselves of the 45-day relief period in full or in part should reach out to their designated inspections point of contact.

The PCAOB expects to fully resume inspections beginning May 11, 2020.

Announcement accessible here

4/17/2020

18

35

COVID-19: Regulatory Resources

Regulatory

SEC Staff Issues More C&DI on COVID-19 Filing Relief

SEC Chief Accountant Statement on the Importance of High-Quality Financial Reporting in Light of Significant Impacts of COVID-19

PCAOB COVID-19: Reminders for Audits Nearing Completion Spotlight

SEC Chair Clayton’s Statement – Investors Remain Front of Mind at the SEC…

SEC CD&Is on COVID-19 Filing Relief

SEC Extension of Conditional Exemptions from Reporting and Proxy Delivery Requirements

SEC Corporation Finance Disclosure Guidance: Topic No. 9

36

COVID-19 WORK METHODS AND INSIGHTS COVID-19: BDO Resources

Insights Webinars / Archives

COVID-19 Audit Committee Guide (coming soon) COVID-19: Preparing for the Economic Impacts of a Pandemic

ASC 740 Income Taxes – Implications of COVID-19 and the CARES Act

Evaluating Compliance and Anti-Fraud Programs – A Case Study with BDO’s Forensics Practice

COVID-19 – Accounting, Reporting and Other Related Considerations

BDO Board Forum – COVID-19: Accounting, Reporting and Other Related Considerations for Boards

Accounting & Reporting Considerations During, And As A Result Of, The Coronavirus Outbreak

COVID-19: Mitigating Risk During Disruption

SEC Provides Conditional Relief and Assistance for Companies Affected by the Coronavirus

CARES Act: What It Means for You & Tax Strategies to Increase Cash Flow

SEC Staff Issues Guidance on Annual Meetings COVID-19: Managing Your Business During a Crisis

Top Cybersecurity Recommendations Amid Covid-19 Pandemic

2020 Private Capital Outlook: M&A, Shifting Strategies & Capital Deployment

COVID-19 Data Security Insight

Comprehensive resource center covering insights and webinar programming, including:

BDO COVID-19 Resource Center

4/17/2020

19

37

PCAOB: Recent Comings and Goings

March 2020 – Former Acting Director of the Division of Enforcement and Investigations Mark A. Adler to leave

March 2020 – Torrie Miller Matous assumes the Chief of Staff role

January 2020 – Patrick Bryan assumes the Director of the Division of Enforcement and Investigations

January 2020 – Chief of Staff Francis “Abe” Dymond to leave

38

PCAOB Recently Completed Standard-Setting

Project Current Stage Timing

Auditing Accounting Estimates, Including Fair Value Measurements, and Amendments to PCAOB Auditing Standards

Final Standard issued on 12/20/2018 – approved by SEC on 7/1/2019

Effective for audits of fiscal years ending on or after December 15, 2020.

Amendments to Auditing Standards for Auditor’s Use of the Work of Specialists

Final Standard issued on 12/20/2018 – approved by SEC on 7/1/2019

Effective for audits of fiscal years ending on or after December 15, 2020.

Refer to: https://pcaobus.org/Standards/Pages/recently-completed-standard-setting-activities.aspx

4/17/2020

20

39

PCAOB Webinars on New Standard Implementation

The PCAOB has announced two complimentary CPE-worthy webinars to assist in implementing new accounting standards:

Webinar on Auditing Accounting Estimates, Including Fair Value MeasurementsTuesday, April 21, 2020 - 1:00 pm – 2:15 pm ET• Provides an overview of the rulemaking on auditing estimates and highlight aspects of the

new requirements. Additional resources, including staff guidance, are currently available on the auditing accounting estimates implementation page.

Webinar on Auditor’s Use of the Work of SpecialistsTuesday, April 21, 2020 - 2:45 pm – 4:00 pm ET• Describes amended requirements for an auditor’s use of the work of a company’s

specialists as audit evidence and using the work of an auditor’s specialist. It will also cover changes to planning considerations under the amended requirements. Additional resources, including staff guidance, are currently available on the auditor’s use of the work of specialists implementation page.

To register: https://pcaob-april-2020-estimates-specialists.eventbrite.com/

40

PCAOB Current Projects – Standard Setting

Project Current Stage

Quality Control Standards, Including Assignment and Documentation of Firm Supervisory Responsibilities

On December 17, 2019, issued a concept release on potential approach for public comment were due March 16, 2020. Currently analyzing comments to determine next steps.

Supervision of Audits Involving Other Auditors

Analyzing comments to determine next steps.

Going Concern Monitoring effect on audits of the changes to the relevant accounting standards. Reminder: AS 2415, Consideration of an Entity's Ability to Continue as a Going Concern, and Staff Audit Practice Alert No. 13 continue to provide the applicable requirements and guidance.

Refer to: https://pcaobus.org/Standards/research-standard-setting-projects/Pages/default.aspx

4/17/2020

21

41

PCAOB Research Agenda

Project Status

Changes in the Use of Data and Technology in the Conduct of Audits

Assessing need for guidance, changes to PCAOB standards or other regulatory actions.

Auditor’s Role Regarding Other Information and Company Performance Measures, Including Non-GAAP Measures

Summarizing research findings and developing recommendations for next steps.

Auditor’s Consideration of Noncompliance with Laws and Regulations

Summarizing research findings and developing recommendations for next steps.

Refer to: https://pcaobus.org/Standards/research-standard-setting-projects/Pages/default.aspx

42

PCAOB 2019 Annual Report

The PCAOB issued its 2019 Annual Report related to its Strategic Plan. Significant activities included:

Inspections Economic & Risk Analysis

Established a dedicated quality control inspections team focused on understanding firm’s quality control systems to inform aspects of inspections –including selection, focus areas of review and consideration of remedial actions

Reorganized Office of Economic and Risk Analysis to encourage increased collaboration to execute strategic plan

Deployed target team to look at select issues - e.g. multi-location audits

Conducted interim analysis and post-implementation review of CAM – See CAM Spotlight

Communicated “good” practices demonstrated by audit firms

Revised inspections report format

4/17/2020

22

43

PCAOB 2019 Annual Report

Enforcement and Investigations Indicators of Audit Quality

Focused on lack of due professional care and professional skepticism, auditor breaches of independence rules, alterations to audit documentation, and non-cooperation with inspectors

Studying usage and usefulness of audit quality indicators (AQIs) to audit committees, investors and audit firms

Higher priority areas: quality control deficiencies and root cause

Discussions with AC chairs (during inspections)

Emerging Technologies Stakeholder Engagement

Data and Technology Task Force is assessing: how auditors use technology to identify and

assess risks of material misstatement; how investors used audited F/S and audit

reports Changing information security environment

Improve timeliness, usefulness and clarity of information

Engaged in outreach with stakeholders

Issued “Spotlights” – timely PCAOB observations

44

Corporate Governance Update

4/17/2020

23

45

Download BDO’s 2020 Shareholder Meeting Agendato learn more

Already well-versed in a company’s financial health, shareholders will gather for annual meetings eager to weigh in on the issues directly impacted by a company’s overall direction and vision. BDO’s Center for Corporate Governance and Financial Reporting weighs in on a variety of topics that corporate management and boards of directors are encouraged to consider in connection with their 2020 annual shareholder meetings.

2020 Shareholder Meeting Agenda

Responding to COVID-19 Shifting Governance and

Investing Landscape Pay Practices Remain in Focus Data Privacy and Protection

Concerns Understanding CAM Controlling the Narrative

ESG Matters• Climate Change and

Today’s Business Environment

• The Business of Funding Political Agendas

• Spotlight on Human Capital Management

• Capacity to Execute Board Oversight Governance

46

2020 Shareholder Meeting Two-Part Webinar Series

2020 Shareholder Meeting Agenda: What's On Deck? - Part 1

Part 1 of our two-part series focused on:

2020 Shareholder Meeting Agenda: What's On Deck? - Part 2

Part 2 of our two-part series focused on:

To access the archive of our two-part webinar series visit https://www.bdo.com/events or click each image above.

2020 Shareholder Meeting Season Landscape Pay Practices and the Changing Role of the

Compensation Committee Human Capital Management and Diversity ESG & Sustainability Matters

2020 Shareholder Meeting Season Landscape Re-cap

Digital Evolution: Data Privacy & Cybersecurity Critical Audit Matters (CAM) Funding Political Agendas Board Capacity

As corporations head into annual shareholder meetings for 2020, a variety of topics have emerged that are top of mind for stakeholders and proxy advisors. How prepared and well-positioned is your board to address concerns of your shareholders?

ARCHIVE RECORDING ARCHIVE RECORDING

4/17/2020

24

47

SEC Release 2020-62—Shifting to a Virtual Meeting

Issued March 13, 2020.

Available at: https://www.sec.gov/ocr/staff-guidance-conducting-annual-meetings-light-covid-19-concerns

Issued to “facilitate the ability of public companies to hold these important [annual meetings], including through the use of technology, and engage with shareholders while complying with the federal securities laws.”

Staff “stands ready” to help with “requests for guidance or relief.”

Staff guidance provides flexibility to change the date and location of the meeting and the use of technologies such as virtual shareholder meetings.

Registrants effecting a change should:

• Issue a press release giving prompt notice of change• File the announcement as definitive additional soliciting material on EDGAR; and• Take all reasonable steps necessary to inform other intermediaries in the proxy process (such as

any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges) of such change.

48

The Annual Meeting Mandate and Virtual Meetings

The SEC has repeatedly stated that the mandate for annual shareholders meetings emanates from state law, not SEC regulation.

Neither the NYSE nor Nasdaq rules are prescriptive concerning the form of an annual shareholders meeting; they require only that one be held.

In addition, Nasdaq rules specify that the meeting must permit shareholder to address company affairs with management.

A company considering a virtual meeting must first look to the law of its state of incorporation relating to the format of meetings.

The Company then must look to see if its Charter and Bylaws enable or at least not prohibit.

Most give sufficient discretion to Board to set the venue and manner of the meeting, but a few older charters specify a location.

A restrictive Bylaw will need to be amended, if time permits.

4/17/2020

25

49

Virtual Annual Meetings Prior to COVID-19

Approximately 30 states permitted virtual meetings, including Massachusetts, Minnesota, Ohio, Pennsylvania, Texas, Virginia and Washington (although some states impose conditions making virtual meetings impractical.)

Forty-two states, including New Jersey, North Carolina and Connecticut, as well as the District of Columbia, permit remote participation in stockholder meetings (i.e., hybrid meetings).

Approximately 10 states preclude virtual or hybrid meetings, and require in-person shareholder meetings.

Others permit a virtual meeting but only if it is alongside a physical meeting (e.g., New York)

Some do not permit them at all. Although the number of virtual meetings is increasing, they have still been relatively

uncommon. We encourage to your review our recent Board Forum archived webinar that provides

significant information about individual state requirements for your reference.

50

The Position of the Proxy Advisors

ISS does not have a formal policy against virtual meetings and has issued a report finding no qualitative governance differences at companies that use them.

Glass Lewis will normally recommend a vote against governance committee members whose companies conduct virtual annual meetings without proper disclosure, including disclosure of:

• Procedures for allowing voting DURING the meeting

• Location of posed questions and answers; and

• Instructions on how to access the virtual meeting platform.

Glass Lewis issued a press release on March 16, 2020 describing the relief granted by the SEC and various stock exchanges and regulators, including those that had encouraged or authorized virtual annual meetings. https://www.glasslewis.com/s-fears-impacting-annual-shareholder-meetings/

• Did not state an intent to make an exception to its normal policy, but at least one Glass Lewis staffer has signaled a relaxation of its position

4/17/2020

26

51

The Position of Institutional Investor Groups

The Council of Institutional Investors, CalPers and the New York City Comptroller have policies against virtual annual meetings.

On March 16, 2020, CII stated that: “Given coronavirus concerns . . . “it is entirely reasonable that some companies will go to virtual-only annual meetings.”

CII hopes that companies “will make it clear that this decision is a one-off, tailored for current circumstances.”

Companies that do hold in-person meetings should be flexible with shareholder proponents on presentation of shareholder proposals, accommodating travel restrictions that they may face.

CII also urged companies to follow best practices “for making virtual meetings participatory, replicating as much as possible the experience of an in-person meeting.”

For more information on communicating and conducting Virtual Shareholder Meetings, refer to BDO’s recently archived webinar.

52

Shareholder Meetings Responding to COVID-19POTENTIAL CONTINGENCY PLANNING TOPICAL QUESTIONS:

Plans to ensure the wellbeing of their professionals and customers

Succession planning for key oversight and management positions Crisis management roles and responsibilities between the board and management team

Crisis management roles and responsibilities between the board and management team

Risk assessment and response to disruptions in all phases of product procurement, development and delivery

Financial management, liquidity and sustainability impacts

Adequacy of financial reporting and disclosures to convey risk

Increased cybersecurity and data privacy considerations as more individuals telework

ESG opportunities and responsibilities during the crisis

Considerations to modify executive pay plans as short-term responsive measures

Ability to provide timely public financial information

Industry-specific risk mitigation plans (e.g.; contracts, supply chain, technology)

4/17/2020

27

53

CAQ Anti-Fraud Collaboration Resources

The Center for Audit Quality’s Anti-Fraud Collaboration examines issues related to fraud and provides timely insights to audit and risk committees along with other stakeholders. Recent releases include: Fraud and Emerging Tech: Blockchain (publication) Fraud and Emerging Tech: Robotic Process (publication) Assessing Corporate Culture: A Proactive Approach to Deter Misconduct

(publication) A New Focus on Corporate Culture: How to Assess Culture and Why (video)

For more resources refer to: https://www.thecaq.org/collections/anti-fraud/ https://antifraudcollaboration.org/resources/

54

Resources

4/17/2020

28

55

The BDO Center for Corporate Governance and Financial Reporting

A dynamic and searchable online resource for boards of directors and financial executives

AN INCREDIBLE RESOURCE AT YOUR FINGERTIPS

The BDO Center for Corporate Governance and Financial Reporting was born from the need to have a comprehensive, online, and easy-to-use resource for topics relevant to boards of directors and financial executives. We encourage you to visit the Center often for up-to-date information and insights you can rely on.

What you will find includes:

Thought leadership, practice aids, tools, and newsletters

Technical updates and insights on emerging business issues

Three-pronged evolving curriculum consisting of upcoming webinars and archived self-study content

Opportunities to engage with BDO thought leaders

External governance community resourcesFor more information about BDO’s Center for Corporate Governance and Financial Reporting,please go to: www.bdo.com/resource-centers/governance.

To begin receiving email notifications regarding BDO publications and event invitations (live and web-based), visit www.bdo.com/member/registration and create a user profile.

If you already have an account on BDO’s website, visit the My Profile page to login and manage your account preferences at www.bdo.com/member/my-profile.

A resource center with the continual education needs of those charged with governance andfinancial reporting in mind!

56

View the full 2020 Quarterly Technical Update Webinar Seriesor register for the Q1 and Q2 webinars below.

Quarterly Technical Update - Q1 2020Wednesday, April 8, 202012:00 PM to 1:00 PM ESTREGISTER NOW

Thursday, April 9. 202012:00 PM to 1:00 PM ESTREGISTER NOW

Friday, April 10, 202012:00 PM to 1:00 PM ESTREGISTER NOW

Quarterly Technical Update - Q2 2020Wednesday, July 8, 202012:00 PM to 1:00 PM ESTREGISTER NOW

Thursday, July 9, 202012:00 PM to 1:00 PM ESTREGISTER NOW

Friday, July 10, 202012:00 PM to 1:00 PM ESTREGISTER NOW

About BDO’s 2020 Quarterly Technical Update Webinar Series

BDO’s Quarterly Technical Update webinar series is designed to help financial management, board directors, and audit committees stay on top of today's hot accounting topics and key regulatory developments. The series is produced and delivered by qualified professionals in BDO’s Assurance practice. One (1) hour of CPE may be earned for each of the quarterly events.

Following these webinars, attendees will be able to: Recognize recently released, project and proposal stage accounting and financial

reporting guidance developed by the FASB, EITF and PCC. Describe timely SEC guidance, topics and resources and their general impact on

accounting and financial reporting. Describe project and proposal stage literature that may have a broad impact on

financial reporting. Describe evolving corporate governance activities including those of the PCAOB,

CAQ and other organizations.

We hope you will join us for this webinar series.

4/17/2020

29

57

Integration of Enterprise Risk Management with Internal AuditFebruary 25, 20203:00 PM to 4:00 PM ETSpeakers: Bill Dawson and Joe CaseyREGISTER NOW

Evaluating Compliance and Anti-Fraud Programs – A Case Study with BDO’s Forensics practiceApril 28, 20203:00 PM to 4:00 PM ETSpeakers: Brad Knight and Paul GreenspanREGISTER NOW

Audit Management Skills: Emotional Intelligence (EQ) and Its Impact on Internal AuditJune 23, 20203:00 PM to 4:00 PM ETSpeakers: Janet SmithREGISTER NOW

Click here for additional upcoming programming and past recordings.

About BDO’s Internal Audit Webinar SeriesBDO’s 2020 Internal Audit Webinar Series is designed to educate those in the internal audit function, risk officers and CFOs at public and private companies alike.

Our 2020 series will cover a variety of topics of including: Enterprise risk management Evaluating compliance and anti-fraud programs Emotional intelligence skills for audit management; Cybersecurity’s impact on SOX compliance; and The IIA Three Lines of Defense position paper expected to be released in 2020.

We hope you will join us for this series.

58

Poll Question

Please indicate whether you would like to be subscribed to BDO’s Center for Corporate Governance and Financial Reporting in order to directly receive publications (such as those previously referenced) when available, as well as invitations to webinars and other events.

1. Yes, please email me with information so I can manage my subscription2. I already subscribe to www.bdo.com3. No thank you, not at this time4. N/A - BDO, BDO Alliance, BDO International

4/17/2020

30

59

Title DateQ4 2020 IFRS Quarterly Update Oct 2020Q3 2020 IFRS Quarterly Update July 2020Q2 2020 IFRS Quarterly Update April 2020COVID-19: Preparing for the Economic Impacts of a Pandemic April 20202020 Quarterly Technical Update Series April/July/Oct 2020BDO Board Forum – COVID-19: Accounting, Reporting and Other Related Considerations for Boards

April 2020

COVID-19: Mitigating Risk During Disruption April 2020

CARES Act: What It Means for You & Tax Strategies to Increase Cash Flow March 2020

COVID-19: Managing Your Business During a Crisis March 20202020 Shareholder Meeting Agenda: What's On Deck? - Part 2 March 20202020 Shareholder Meeting Agenda: What's On Deck? - Part 1 March 2020What’s on the Minds of Boards: BDO 2019 Board Survey (Part 2) Feb 2020What’s on the Minds of Boards: BDO 2019 Board Survey (Part 1) Jan 2020Q1 2020 IFRS Quarterly Update Jan 2020Quarterly Technical Update – Q4 2019 Jan 2020

BDO Board GovernanceUPCOMING / ARCHIVED WEBINARS

For a complete listing of BDO webinars and archived webinars, refer here.

60

BDO Board GovernancePUBLICATIONS

Recommended ResourcesCOVID-19 Audit Committee Guide (coming soon)SEC Staff Issues More Compliance and Disclosure Interpretations on COVID-19 Filing ReliefCOVID-19’s Impact on U.S. Retirement PlansSEC Staff Issues Compliance and Disclosure Interpretations on COVID-19 Filing ReliefCOVID-19 – Accounting, Reporting and Other Related ConsiderationsAccounting & Reporting Considerations During, and As a Result Of, the CoronavirusSEC Staff Issues Guidance on Annual MeetingsResilience for a Rainy Day: Spotlight on Geopolitical Issues2020 Shareholder Meeting AgendaSEC Provides Conditional Relief and Assistance for Companies Affected by the CoronavirusSEC Changes the Accelerated and Large Accelerated Filer DefinitionsNavigating Revenue RecognitionFinancial Reporting Guide for Accounting Changes and Error CorrectionsSEC Proposes Significant Changes to Regulation S-K and Provides Guidance on Disclosure of KPIsFASB Clarifies Interaction of Accounting Standards for Equity Securities, Equity Method Investments and Derivatives


4/17/2020

31

61

Recommended Resources2019 Year-end Audit Committee AgendaThe 2019 AICPA SEC and PCAOB ConferenceBDO Knows CECL: Presentation and DisclosureAccounting Standards Updates: Effective First Quarter 2020FASB Issues Improvements for Credit Losses StandardBDO Knows CECL: FASB Topic 326, Financial Instruments – Credit LossesFASB Issues Two Updates to Finalize Deferral of Effective Dates for Major New Accounting StandardsFASB Clarifies Accounting for Share-Based Payments to Customers3 Reasons Why You Need to Forge Ahead With Lease Accounting ImplementationBDO Knows Lease AccountingLease Accounting Road to Compliance ChecklistBDO Lease Accounting Resource CenterBDO Revenue Recognition Resource CenterCECL Implementation GuideYour CECL Implementation Roadmap

BDO Board GovernancePUBLICATIONS


ASSR 2020 Quarterly Technical Update-Q1

Documents

Transcript of ASSR 2020 Quarterly Technical Update-Q1